Define Ethics.
The Principles of conduct governing an individual or group.
Ethics guide behavior and decision-making in professional contexts.
What are three actions which demonstrate a broker’s unethical conduct?
- To sell more insurance than is needed
- To sell higher priced coverages when equivalent coverage is available at a lower price
- To recommend policies with the highest commission rates
These actions compromise the integrity of the brokerage profession.
What is contingent profit commission?
Offered by insurance companies to those brokerages who have a book of business that creates a very low loss ratio for the insurance company.
This commission incentivizes brokers to maintain low claims.
What are the standards of ethics outlined in the insurance act?
- Misrepresentation
- Violate provision of insurance act
- Fail to pay premiums to insurers
- Place insurance with unlicensed insurer
- Prove to be incompetent
These standards ensure accountability and professionalism in the insurance industry.
What are the ethical standards of provincial professional associations?
- Duty to clients: provide best coverage, hold info in confidence, be competent, serve client diligence
- Duty to insurers: Follow terms of agency agreement, follow binding authority limits, deal honestly with monies, tell complete truth about accounts
- Duty to fellow brokers: Compete fairly, encourage public respect, co-operate for betterment of industry, treat fellow brokers with respect
These standards promote integrity and collaboration within the industry.
What are three qualities of professionals?
- High ethical standards
- High standard of educational preparedness and training with mandatory continuous education
- Formal association regulating power over its members
These qualities contribute to the credibility and reliability of professionals.
Define a professional.
People who possess special skills or knowledge.
Professionals are often recognized for their expertise in specific fields.
What responsibilities do brokers owe their customers and to insurers?
- Client: Brokers must exercise reasonable skill and diligence in their affairs with customers
- Duty to insurer: Brokers must comply with all the conditions of agency agreement, ensure timely payment of premiums collected on their behalf and tell the truth about all applications submitted.
These responsibilities ensure trust and accountability in broker-client and broker-insurer relationships.
What are 6 leading causes of E&O losses?
- Inadequate coverage – EX) Failure to provide proper coverage
- Misrepresentation or Description errors – failure to provide all info to insurer
- Cancellation/ renewal errors - Not renewing at all or not renewing adequate coverage
- Policy change errors- When errors occur on revisions or endorsements required during the policy year
- Processing delays - When brokerages do not request changes required immediately
- Violation of agency agreements - When brokerages exceed their binding authority
Understanding these causes helps brokers mitigate risks.
What are five things brokers can do to reduce their E&O losses?
- Ensure they are acting within scope of their competence
- Take all steps necessary to determine client’s needs
- Be advisors, not deciders
- Know coverage and insurers
- Keep within bounds of binding authority
These practices promote responsible brokerage and minimize errors.
How to control E&O losses when they do occur?
- Documentation – confirming letter & conversation/telephone logs up to date
- Develop consistent sales procedures
Proper documentation and procedures are essential for managing errors and omissions.
What does E&O insurance cover?
E&O policies insure the negligent acts involving error and omissions of the insured, or employees, while acting as an insurance broker.
This coverage protects brokers from claims arising from their professional services.
What types of losses are not insured on E&O policies?
E&O policies will not insure dishonest, fraudulent or criminal acts.
This exclusion emphasizes the importance of ethical conduct in the profession.
